Hong Kong Economic Times Holdings (HKG:423) Has Announced A Dividend Of HK$0.03

Hong Kong Economic Times Holdings Limited (HKG:423) will pay a dividend of HK$0.03 on the 23rd of December. This means the dividend yield will be fairly typical at 8.4%.

View our latest analysis for Hong Kong Economic Times Holdings

Hong Kong Economic Times Holdings' Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Hong Kong Economic Times Holdings was paying out quite a large proportion of both earnings and cash flow, with the dividend being 955% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Earnings per share could rise by 2.4% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 91%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was HK$0.088 in 2012, and the most recent fiscal year payment was HK$0.095. Dividend payments have been growing, but very slowly over the period. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been crawling upwards at 2.4% per year. Slow growth and a high payout ratio could mean that Hong Kong Economic Times Holdings has maxed out the amount that it has been able to pay to shareholders. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 4 warning signs for Hong Kong Economic Times Holdings (of which 2 are significant!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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